The United States labor market is currently weathering a stormy period. Much of this turmoil stems from major policy changes during the second administration of President Donald Trump. Recent reports are showing early warning signs in the nascent recovery’s job landscape. This slowdown has resulted in recent layoffs, an increase in unemployment claims, and an abrupt deceleration in job growth. New data from ADP just pulled the rug right out from under that good news. For context, in June, the US private sector shed an estimated 33,000 jobs — its first down month in more than two years.
Our economy is in dire straits. As these broad-based policies including, but not limited to, sweeping tariffs, mass-deportations, and reductions to federal spending are being proposed and debated, analysts are rushing to quantify their impact. In this article, we’ll look at how these policies are shaping the employment landscape in today’s world. It further demystifies what all these changes will mean for employers and workers moving forward.
Unemployment Rates Rise as Job Cuts Increase
The recent ADP report highlights a stark reality: the US has witnessed a significant pullback in job gains. Coming on the heels of a downwardly revised estimate of only 139,000 jobs added in May, the June report points to a potentially serious turn. The change in the unemployment rate is forecast to be +0.1 pp, for a total of 4.3%. It represents the highest jobless rate we’ve had since October 2021.
The unemployment rate is already climbing, and to cope with the economic fallout, employers from all sectors have announced a staggering 48,000 job cuts in June alone. This number represents a steep 49% decrease compared to May, and a slight 2% decrease from June of last year. Layoff announcements are coming on an almost weekly basis. It’s as if we’ve been teleported back to those chaotic early months of the pandemic—and even the Great Recession itself.
“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month.” – Nela Richardson
This unpredictability has led to a labor market with little churn. Hiring activity has dipped towards ten-year lows as workers are hesitant to quit their jobs, afraid of where the world stands right now. In this economic recovery, first-time claims for unemployment benefits have steadily risen, with continuing claims remaining close to four-year peaks. These historic trends suggest that this is more than a blip in the labor market. It’s experiencing a tectonic shift in terms of structure that is being externally forced.
The Impact of Policy Changes on Employment
Thanks to the Trump administration’s misguided ideological policies, new layers of complexity have been added to an already fragile labor market. Broad-based tariffs have created uncertainty among businesses regarding future costs and pricing strategies. Ron Hetrick, a senior labor economist at Lightcast, emphasizes the effects tariff uncertainty has had on businesses. Consequently, most of the affected firms have frozen their hiring plans.
“When the uncertainty entered in, when the tariff uncertainty entered in, the Fed got nervous about changing rates, and you just saw all of that retracted overnight,” – Ron Hetrick
Hetrick warns that many sectors may be facing true economic frailty due to depressed sales. He is quick to add that what you’re seeing in employers’ reluctance is more from uncertainty than a total drop in demand. This reluctance influences hiring across sectors, contributing to a weak labor-market response with more timid attempts to recruit.
Foreign-born workers have outstripped native growth, providing the vast majority of labor force growth since February 2020. In fact, they explain about three-fourths of this surge. Sectors that usually depend on this demographic—education and health services, as well as leisure and hospitality—have shed a total of 56,000 jobs as of May. Businesses are scrambling to adapt to new immigration policies and new federal cuts. The long-term impact on jobs is still unclear.
“It will be months or even years before we see the full effects of tariffs, federal cuts and immigration policies in the labor market.” – Nela Richardson
Anemic Job Growth Signals Economic Concerns
This comes as analysts are sounding alarm bells about the anemic job growth seen in last week’s reports. The softer ADP data indicates that employers may be getting jittery as they continue to feel their way through a still-tough economic and inflationary environment. Even with unemployment at record lows, underlying dirty little secrets of the labor market tell a different and much weaker story, writes Ron Hetrick.
“I don’t believe we have a weak labor market because the economy is poor. I think we have a weak labor market because companies don’t feel good.” – Ron Hetrick
The outlook from employers seems to be more cautious than cynical. It’s understandable that many are still gunshy about committing to hiring with possible storm clouds forming over the macro economy or a shakeup in policy priorities. Daniel Zhao, policy director at Jobcase, emphasizes that tariffs are only part of the broader equation impacting the labor market’s health today.
“The early impacts of tariffs are just one drag on the job market.” – Daniel Zhao
Expectations for a possible cut in July have jumped to 25%. Consequently, businesses will have to pivot their go-to-market strategy yet again. The evolving economic landscape will necessitate careful monitoring as companies decide how best to respond to both internal and external pressures.